"We're seeing safe haven liquidation in the market, there is no reason for safe haven at the moment. Although equities are pulling back today, they are showing some residual strength," said Phillip Streible, senior commodities strategist at RJO Futures.

Bullion prices have shed more than 4%, or over $60, in less than a week, mainly hurt by a broad uptick in equity markets.

Considering the large number of net long positions in gold, "all those people who jumped into this party late are starting to liquidate their positions right now. We're (also) seeing yields are up a bit," Streible added.

Speculators increased their bullish positions in COMEX gold and silver contracts in the week to Sept. 3, the U.S. Commodity Futures Trading Commission said on Friday.

Investors are now awaiting Thursday's European Central Bank meeting, which is widely expected to deliver a cut to interest rates. The U.S. Federal Reserve too is expected to cut rates next week as policymakers race to battle risks of a global downturn.

However, analysts said gold's overall positive trajectory was still intact.

"We now expect gold prices to trade stronger for longer, possibly breaching $2,000/oz and posting new cyclical highs at some point in the next year or two," Citi bank analysts wrote in a note.

Elsewhere, platinum dropped 1.2% to $935 per ounce, after nearing the $1,000 mark last week.

"Platinum has rallied the past two weeks as investors looked for 'cheaper' haven assets. While consolidation is likely in the near term, we remain bullish platinum over the next 12 months," Citi said.

Silver rose 0.5% to $18.04 per ounce, while palladium rose 0.9% to $1,557.12. (Reporting by Sumita Layek in Bengaluru; Editing by Steve Orlofsky)